Bangalore: Local shipowners plan to ask the government to review its rules on foreign direct investment (FDI) in shipping to protect the sector from overseas competition.

India has allowed 100% FDI in shipping since 2001 but until now no overseas firm has used the option.

Seeking protection: A file photo of Jawaharlal Nehru Port in Mumbai. India has allowed 100% FDI in shipping since 2001, but until now no firm from outside the country has used the option. Ashesh Shah / Mint

That may change with Malaysian petroleum shipping firm AET Tanker Holdings Sdn Bhd looking to operate from India by registering some of its vessels here.

“If you want to start a company in Malaysia, you should hand over 51% stake to a local company there," said the managing director of a Mumbai-based shipping firm that specializes in carrying petroleum products along India’s coast. “If AET wants to set up a company and operate from India, it should give 51% stake to an Indian company. It should be reciprocal." The executive declined to be named.

Local shipowners plan to meet commerce minister Anand Sharma to lobby their case. They have put forward rules prevailing in Indonesia, Malaysia, China and West Asia to make their point.

The Indonesian government has reserved all liquefied petroleum gas (LPG) shipments on domestic routes for ships under the Indonesian flag and majority owned by its citizens. Any firm that wants to operate in West Asia should have a local partner who holds a majority stake in the venture. China has made it mandatory that only Chinese companies can move coastal cargo.

“In today’s context, when the world is looking inward, and every government talks about protectionist measures for their indigenous industry, we must do the same in India," S. Hajara, chairman and managing director of state-run Shipping Corp. of India Ltd (SCI), India’s biggest ocean liner, told Mint in an earlier interview on 17 August.Hajara is also the president of industry lobby group Indian National Shipowners Association.

“Every industry has got a trade barrier. We are saying that the Indian coast should be completely reserved for the Indian flag carriers," he added.

Local shipowners say India has suddenly caught the fancy of foreign shipping firms as single hull tankers can be operated on the country’s coast till 2015.

“They are looking at dumping their single hull tankers in India because such tankers cannot be operated in their own countries after December 2010," a shipping company executive said, asking not to be named.

The International Maritime Organization, the global maritime regulator, has mandated that single-bottom tankers be replaced with double-bottom ones by December 2010 globally, to make carriage of liquids such as oil safer.

Several maritime nations, however, have framed their own rules on single bottom tankers plying along their coast purely for carrying domestic cargo even after 2010.

India’s maritime regulator, the director general of shipping, has allowed single hull tankers to ply along the country’s coast till 2015.

AET says its ships are well maintained.

“A central pillar of AET’s business strategy is to forge long-term relationships with quality partners—and that demands the continued operation of well-maintained vessels," said Paul Lovell, head of corporate communications at AET.

Exploring the opportunity to register an AET vessel in India is a logical extension to the firm’s considerable investment in India, he said, adding that any vessel being redeployed to India would undergo a thorough inspection.